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Audi GroupQuarterly ReportJanuary 1 to September 30, 2017

Audi Vorsprung durch Technik

THIRD QUARTER REPORT 2017

2

ECONOMIC ENVIRONMENT

The first nine months of 2017 was characterized by robust

global economic growth, with both industrialized and develop-

ing economies picking up momentum compared with the prior-

year period.

Supported by sustained low interest rates, Western European

economies held their positive trajectory. This was also reflected

in declining unemployment figures. Economic output likewise

improved in Central and Eastern Europe, notably aided by eco-

nomic recovery in Russia after a lengthy recession. The U.S.

economy benefited from strong consumer demand and re-

corded a higher GDP growth than in the same period last year.

Following prolonged recessionary conditions, the health of the

Brazilian economy improved in the first nine months of 2017.

The Chinese economy continued expanding at a rapid rate by

global standards, driven by economic policy stimuli and strong

domestic demand.

Global demand for passenger cars rose by 3.2 percent from Jan-

uary through September 2017 to 61.3 (59.4) million vehicles.

New registrations increased in Western Europe, Central and

Eastern Europe, the Asia-Pacific region and South America, but

were down in North America.

In the course of the positive macroeconomic trends, the Western

European automotive market recorded 2.8 percent growth in

new registrations. The German market grew with a 2.2 percent

increase in car sales on the back of strengthening demand

from both private and commercial customers. At 10.6 percent

growth in new vehicle registrations, the Russian automotive

market made a sharp recovery. By contrast, the U.S. market for

passenger cars and light commercial vehicles was unable to

match its high prior-year level, with sales down by –1.8 percent.

At 7.9 percent growth, new registrations of passenger cars and

light commercial vehicles in Brazil increased for the first time

in four years. The number of newly registered vehicles in China

rose by 4.5 percent, which also made for another record in

absolute growth.

Compared with the prior-year period, the established motor-

cycle markets in the displacement segment above 500 cc

recorded a decline in demand of –2.4 percent from January

through September. While new registrations in Western

European markets showed a mixed picture, unit sales in

North America were down.

PRODUCTION 1)

The Audi Group produced 1,398,543 (1,445,824) cars world-

wide in the first nine months of 2017. This figure includes

395,748 (411,814) Audi vehicles manufactured by the associ-

ated company FAW-Volkswagen Automotive Company, Ltd.,

Changchun (China). The Audi Group built 1,395,654

(1,443,097) cars of the Audi brand and 2,889 (2,727)

Lamborghini brand vehicles from January through September.

In the same period, 47,729 (50,655) motorcycles of the

Ducati brand were produced.

A total of 415,552 (460,388) Audi brand vehicles left the

production line at our Group headquarters in Ingolstadt in the

first three quarters of 2017. The factors behind this lower

production figure compared with the prior-year period include

model changeovers and production starts. In addition, a fire at

a supplier temporarily affected production of the A4 and A5

car lines in the first quarter.

2

1) This includes 395,748 (411,814) Audi models manufactured by the associated company FAW-Volkswagen Automotive Company, Ltd., Changchun (China). 1) This includes 395,748 (411,814) Audi models manufactured by the associated company FAW-Volkswagen Automotive Company, Ltd., Changchun (China).

Fuel consumption and CO2 emission figures as well as the efficiency classes can be found on page 16.


Audi A8


3

In Neckarsulm, we manufactured 150,768 (202,853) Audi

models, fewer than in the previous year due to model cycle

factors that mainly affected the upper car lines.

At AUDI MÉXICO S.A. de C.V., we built 107,923 (843) vehicles

at our production site in San José Chiapa (Mexico) in the first

nine months of the current fiscal year.

Audi Hungaria Zrt. produced 78,536 (93,011) vehicles at our

site in Győr (Hungary), driven among other factors by current

market demand in the compact sedan segment.

At AUDI BRUSSELS S.A./N.V., Brussels (Belgium), we produced

a total of 74,510 (84,002) vehicles of the brand with the Four

Rings. The plant was also preparing to produce our first all-

electric SUV, the Audi e-tron.

At São José dos Pinhais near Curitiba (Brazil), AUDI DO BRASIL

INDUSTRIA E COMERCIO DE VEICULOS LTDA., São Paulo,

manufactured a total of 3,538 (5,817) cars in the first three

quarters of 2017.

At the Volkswagen Group sites in Martorell (Spain) and

Bratislava (Slovakia), 85,327 (103,851) and 78,646 (75,547)

vehicles, respectively, of the brand with the Four Rings left

the production line in the same period. We managed produc-

tion of our Audi Q3 car line in Martorell to reflect the model

cycle. The Bratislava plant already built the first units of our

new Audi Q8 in preparation for its volume production starting

in 2018. With the Q8, a premium SUV with the style of a

coupe, we will gain access to a new segment in the full-size

category.

At Aurangabad (India) – also a Volkswagen Group site – a total

of 5,106 (4,971) Audi vehicles were produced in the first three

quarters of 2017.

The associated company FAW-Volkswagen Automotive

Company, Ltd., Changchun (China), manufactured 335,484

(352,065) Audi brand cars at its production site in Changchun

(China) and 60,264 (59,749) Audi vehicles in the southern

Chinese city of Foshan in the first nine months of the current

fiscal year. In light of the necessary coordination concerning

the long-term strategic direction in China, we adopted a

flexible approach to our production management at the

Chinese sites.

Automobili Lamborghini S.p.A., Sant’Agata Bolognese (Italy),

produced 2,889 (2,727) Lamborghini brand vehicles in the

first three quarters of 2017. We already built the first models

of the Lamborghini Urus in preparation for its series produc-

tion starting in 2018. The Urus marks Lamborghini’s debut in

the Super SUV segment, combining all-terrain capability with

the power and driving characteristics of a supercar. At the

same time, this third car line is expected to stabilize volume

growth at the Lamborghini brand, strengthening its brand

awareness and earnings power.

The Audi Group produced 455,377 (460,613) cars worldwide

in the third quarter of 2017. This figure includes 136,886

(131,647) Audi vehicles manufactured by the associated com-

pany FAW-Volkswagen Automotive Company, Ltd., Changchun

(China). A total of 454,553 (459,834) units were attributable

to the Audi core brand. The Lamborghini brand manufactured

824 (779) vehicles in the same period. In all, 9,859 (7,541)

motorcycles of the Ducati brand were produced from July

through September 2017.

Read more about the production sites

of the individual models on page 93 of the

Audi 2016 Annual Report.


Fuel consumption and CO2 emission figures as well as the efficiency classes can be found on page 15. Fuel consumption and CO2 emission figures as well as the efficiency classes can be found on page 16.

Audi SQ5

http://www.audi.com/content/dam/com/EN/investor-relations/financial_reports/annual-reports/ar-2016.pdf


4

Car production by model 1)

1–9/2017 1–9/2016

Audi A1 15,940 19,621

Audi A1 Sportback 58,570 64,381

Audi Q2 77,429 2,503

Audi A3 6,689 12,290


Audi A3 Sedan 89,567 97,586

Audi A3 Cabriolet 9,211 12,058

Audi Q3 151,538 174,450

Audi TT Coupé 14,309 17,111

Audi TT Roadster 3,862 4,445

Audi A4 Sedan 149,468 171,655

Audi A4 Avant 78,771 100,456

Audi A4 allroad quattro 16,914 11,142


Audi A5 Coupé 21,240 10,802


Audi Q5 208,695 218,309

Audi A6 Sedan 137,360 157,996

Audi A6 Avant 41,475 47,016



Audi Q7 78,863 76,266

Audi Q8 250 –

Audi A8 12,330 17,627

Audi R8 Coupé 1,434 2,254

Audi R8 Spyder 1,069 278

Audi brand 1,395,654 1,443,097

Lamborghini Urus 47 –

Lamborghini Huracán 1,926 1,852

Lamborghini Aventador 916 875

Lamborghini brand 2,889 2,727

Automotive segment 1,398,543 1,445,824

1) The table includes 395,748 (411,814) Audi models manufactured by the associated company FAW-Volkswagen Automotive Company, Ltd., Changchun (China).

Car engine production

1–9/2017 1–9/2016

Audi Hungaria Zrt. 1,499,362 1,477,286

Automobili Lamborghini S.p.A. 918 897

Car engine production 1,500,280 1,478,183

Motorcycle production

1–9/2017 1–9/2016

Scrambler 12,280 16,237

Naked/Sport Cruiser (Diavel, Monster) 14,749 16,029

Dual/Hyper (Hypermotard, Multistrada) 11,763 12,592

Sport (SuperSport, Superbike) 8,937 5,797

Ducati brand 47,729 50,655

Motorcycles segment 47,729 50,655

Worldwide, the Ducati brand produced 47,729 (50,655)

motorcycles from January through September 2017. The first

half of 2016 was influenced by market introductions being

brought forward, whereas market introductions in 2017 were

scheduled differently in line with market requirements. Pro-

duction consequently increased over the course of the year and

was significantly higher in the third quarter than in the prior-

year quarter. A total of 39,475 (42,017) bikes were produced

in the first nine months at the company headquarters in

Bologna (Italy). Over the same period, Ducati manufactured

7,374 (7,970) bikes at the Amphur Pluakdaeng plant in

Thailand. In Manaus (Brazil), 880 (668) units were built on a

contract manufacturing basis.



Ducati Monster 797


5

DELIVERIES AND DISTRIBUTION 1), 2)

The Audi Group delivered 1,552,472 (1,578,784) cars to

customers worldwide from January through September

2017 – a year-on-year decline of –1.7 percent. This figure in-

cludes deliveries of 381,800 (402,960) Audi models built

locally by FAW-Volkswagen Automotive Company, Ltd., Chang-

chun (China). The Audi core brand handed a total of 1,380,778

(1,408,828) vehicles over to customers. This –2.0 percent

decline in deliveries compared with the previous year was

attributable in particular to the growing intensity of negotia-

tions conducted with our Chinese partners in the first half of

2017 concerning the further strategic development of our

China business. Following successful conclusion of the negoti-

ations in China, the Audi brand again recorded growth in deliv-

eries in the third quarter of 2017, up 3.6 percent to 471,826

(455,535) cars. In the first nine months of the current fiscal

year, the Lamborghini brand increased its deliveries to custom-

ers to 2,930 (2,867) supercars. Deliveries to customers of

other Volkswagen Group brands totaled 168,764 (167,089)

cars. The Ducati brand delivered a total of 46,896 (46,660)

motorcycles to customers.

In Western Europe, we increased our delivery volume to

622,882 (616,091) Audi vehicles. Demand for our Audi

models was also positive in our home market Germany, rising

by 0.7 percent to 232,518 (230,890) cars. At 138,870

(139,039) Audi vehicles, our volume in the United Kingdom

was almost at the prior-year level despite the decline in overall

market demand. By contrast, we increased Audi brand deliver-

ies in Italy by 10.3 percent to 51,765 (46,931) cars. While

demand for Audi vehicles in Spain also recorded encouraging

growth of 6.3 percent, our deliveries in France were down

–1.0 percent year on year.

In the Central and Eastern Europe region, we handed a total of

38,691 (40,934) Audi vehicles over to customers in the period

January through September 2017. The rise in deliveries in

numerous Central European countries only partly made up for

the dwindling volume of vehicles in Russia.

In the same period, a total of 198,997 (186,837) cars of the

brand with the Four Rings were handed over to customers in

the North America region. For example, we continued our

growth trajectory in the USA with an increase of 5.7 percent to

160,914 (152,179) units despite the declining overall market

volume. Demand for our Audi models in that country has

continuously posted new monthly highs since January 2011.

Our deliveries also recorded encouraging growth in Canada,

showing a significant increase of 19.4 percent.

We handed 15,520 (17,475) Audi vehicles over to customers

in South America in the first nine months of 2017 – primarily

because of declining delivery volumes in Brazil.

In the same period, we recorded 471,917 (509,983) Audi

brand deliveries in the Asia-Pacific region. In China, our biggest

single market, the delivery volume has been growing again

since June 2017, exceeding the prior-year period by 9.2 percent

in the third quarter. The negotiations on the further strategic

development of our China business, which have now been suc-

cessfully concluded, were a factor in the –4.9 percent decline in

deliveries to 418,670 (440,233) vehicles from January through

September. As throughout 2016, our delivery performance in

the Asia-Pacific region was again negatively affected by

certification-related sales restrictions in South Korea.

In the first few months of 2017, the special situation in the

Asia-Pacific region weighed on our global delivery performance.

Since June, growth – especially in China – has been having

positive effects again, with the result that the cumulative

global shortfall has been diminishing month by month and

finally stood at just –2.0 percent.

The Audi Group increased deliveries to customers to 517,433

(499,044) cars worldwide in the third quarter of 2017. This

figure includes deliveries of 148,389 (137,250) Audi models

built locally by FAW-Volkswagen Automotive Company, Ltd.,

Changchun (China). The Audi core brand delivered a total of

471,826 (455,535) vehicles. In all, 44,768 (42,655) cars of

other Volkswagen Group brands were handed over to custom-

ers in the same period. The Lamborghini brand delivered 839

(854) supercars from July through September 2017, while in

the same period the Ducati brand delivered a total of 12,038

(11,857) motorcycles.

1) This includes 381,800 (402,960) Audi models built locally by the associated company FAW-Volkswagen Automotive Company, Ltd., Changchun (China). 2) The figures for the prior-year period have been marginally adjusted.



6

Car deliveries to customers by model 1) 2)

1–9/2017 1–9/2016

Audi A1 15,550 21,453


Audi Q2 70,572 967

Audi A3 7,523 13,322


Audi A3 Sedan 92,701 105,337


Audi Q3 149,888 172,227

Audi TT Coupé 14,443 19,369

Audi TT Roadster 4,237 5,486

Audi A4 Sedan 154,097 169,261

Audi A4 Avant 80,696 85,560



Audi A5 Coupé 18,924 11,916


Audi Q5 200,522 203,944

Audi A6 Sedan 138,466 153,457

Audi A6 Avant 42,284 44,967



Audi Q7 77,705 74,307

Audi A8 15,172 17,708

Audi R8 Coupé 1,493 2,014

Audi R8 Spyder 998 217

Audi brand 1,380,778 1,408,828

Lamborghini Huracán 1,963 1,953

Lamborghini Aventador 967 914

Lamborghini brand 2,930 2,867

Other Volkswagen Group brands 168,764 167,089

Automotive segment 1,552,472 1,578,784

1) The table includes deliveries of 381,800 (402,960) vehicles built locally by the associated company FAW-Volkswagen Automotive Company, Ltd., Changchun (China).

2) The figures for the prior-year period have been marginally adjusted.

Motorcycle deliveries to customers 1)

1–9/2017 1–9/2016

Scrambler 11,976 13,249

Naked/Sport Cruiser (Diavel, Monster, Streetfighter) 14,245 15,346

Dual/Hyper (Hypermotard, Multistrada) 12,533 11,558

Sport (SuperSport, Superbike) 8,142 6,507

Ducati brand 46,896 46,660

Motorcycles segment 46,896 46,660

1) The figures for the prior-year period have been marginally adjusted.

Worldwide, the Ducati brand delivered 46,896 (46,660)

motorcycles to customers in the first nine months of 2017.

The motorcycle manufacturer recorded positive delivery

performance, particularly in its Italian home market. By

contrast, the German market posted a decrease.



Audi RS 4 Avant


7

7

Audi models presented or introduced in the 2017 reporting period

Models Main characteristics and new features

Audi S5 Sportback and Audi A5 Sportback (new models)

> New, elegant and emotional design

> Newly developed suspension and high-performance drives

> Numerous driver assistance systems, e.g. optional adaptive cruise control (ACC) with traffic jam assist

> Gradual market introduction since January 2017

Audi S5 Cabriolet and Audi A5 Cabriolet (new models)

> New, sporty and elegant design

> Fully automatic acoustic hood opens and closes up to a speed of 50 km/h

> Optionally available with efficient quattro drive with ultra technology or quattro permanent all-wheel drive

> Phased market introduction since March 2017

Audi SQ5 and Audi Q5 (new models)

> Extensive range of driver assistance systems, e.g. standard-fit Audi pre sense city assistance system which, for instance, warns of crossing pedestrians and, within the system limits, triggers automatic emergency braking if necessary

> Efficiency enhanced by improved aerodynamics and a reduced unladen weight of up to 90 kilograms compared with the predecessor model, depending on engine version

> New adaptive air suspension as an option, for instance to adapt damping characteristics

> Gradual market introduction since January (Q5) and April (SQ5) 2017

Audi RS 3 Sedan (new model, no predecessor)

> First compact Audi sedan with the RS label

> Five-cylinder engine, quattro permanent all-wheel drive and numerous optional assistance systems

> Phased market introduction since May 2017

Audi RS 5 Coupé (new model)

> Combines elegant aesthetics with RS performance

> Newly developed, powerful engine, quattro permanent all-wheel drive as standard

> Enhanced efficiency and reduced weight compared with predecessor model

> Gradual market introduction since July 2017

Audi A4 Avant g-tron (new model)

> Combines familiar sportiness and a progressive design idiom with climate-friendly mobility

> Can be powered with compressed natural gas (CNG) or with gasoline

> Phased market introduction since August 2017

Audi A5 Sportback g-tron (new model)

> Combines familiar sportiness and a progressive design idiom with climate-friendly mobility

> Can be powered with compressed natural gas (CNG) or with gasoline

> Phased market introduction since August 2017

Audi RS 3 Sportback (product improvement)

> Sharper RS design (e.g. eye-catching Singleframe, large air inlets, striking sill trims)

> Five-cylinder engine, quattro permanent all-wheel drive and numerous optional assistance systems

> Gradual market introduction since August 2017



8


Audi A8 (new model)

> New design gives expression to sporty elegance, sophistication and quattro permanent all-wheel drive

> Clear, new formal idiom in interior design: Reduction as an aesthetic design principle

> New MMI touch response operating concept increases ease of operation thanks to the combination of haptic and acoustic feedback; fully integrated into the interior’s black panel surface

> Systematically electrified drive: new mild hybrid technology with 48-volt electrical system as standard

> Extensive range of innovative driver assistance systems, e.g. optionally with Audi AI traffic jam pilot likely to be the world’s first solution for highly automated driving in slow-moving traffic at up to 60 km/h on freeways (the driver assistance systems will be gradually rolled out in individual markets once the required legal frameworks are in place)

> Redesigned, optional Audi AI active suspension acts on each wheel individually and permits a wide range of driving characteristics – from the smooth ride comfort of a luxury sedan to the dynamism of a sports car

> Presentation in July 2017, market introduction later on in 2017

Audi RS 4 Avant (new model)

> The fourth generation combines everyday usability with RS performance

> Sharper RS design (e.g. large air inlets with typical RS honeycomb structure, striking Singleframe, prominent roof edge spoiler)

> Enhanced efficiency and reduced weight compared with predecessor model

> Presentation in September 2017, market introduction in early 2018

Audi A7 Sportback (new model)

> Four-door coupe embodies progressiveness in design and technology

> Clear, reduced formal idiom in the interior, supplemented by the new MMI touch response operating concept

> Systematically electrified drive: new mild-hybrid system available as standard

> Extensive range of standard and optional driver assistance systems

> Presentation in October 2017, market introduction in early 2018

Lamborghini models presented or introduced in the 2017 reporting period


Lamborghini Huracán RWD Spyder (new model)

> New front and rear design for a powerful look

> Modern infotainment with high-resolution 12.3-inch TFT display

> Exclusively rear-wheel drive for dynamic handling

> Available for customers since March 2017

Lamborghini Aventador S Coupé (product improvement)

> Large number of new design features with focus on aerodynamic optimization

> New four-wheel steering provides improved agility and stability

> Individually configurable EGO driving mode and adaptive dampers

> Available for customers since June 2017

Lamborghini Huracán Performante (new model)

> Hybrid aluminum and carbon fiber chassis with clear focus on lightweight construction

> New, active aerodynamic system “Aerodinamica Lamborghini Attiva” (ALA) actively distributes the aerodynamic load (for either high downforce or low drag)

> Fitted with the most powerful ten-cylinder engine equipped by Lamborghini to date

> Available for customers since September 2017

Lamborghini Aventador S Roadster (product improvement)

> Aerodynamic roadster design

> Removable carbon fiber hardtop roof elements with a convex shape ensure sufficient space in the interior

> New four-wheel steering provides improved agility and stability

> Individually configurable EGO driving mode and adaptive dampers

> Presentation in September 2017, gradual market introduction in 2018



9

9

Ducati models introduced in the period under review

The Monster series was rounded out with the all-new Monster

797 at the start of the year. The new Ducati Multistrada 950

has also been on sale to customers since the start of 2017.

In spring, the Ducati Scrambler series was expanded with the

additions of the Desert Sled and Café Racer models. The new

Ducati SuperSport and the Ducati SuperSport S are other new

arrivals in our Italian motorcycle manufacturer’s product

range. Furthermore, Ducati launched the exclusive 1299

Superleggera, the most powerful twin-cylinder bike it ever

built. In addition, the Multistrada 1200 Enduro Pro and the

1299 Panigale R Final Edition – each in exclusive design – have

been on sale at dealers since the summer. The Ducati Scrambler

series was extended by the Mach 2.0 model in September.

FINANCIAL PERFORMANCE INDICATORS

The Audi Group generated revenue of EUR 44,235 (44,017)

million from January through September 2017.

Revenue for the Automotive segment reached EUR 43,638

(43,404) million. In particular, strong demand for the new

Audi A5 family and the Audi Q2 as well as volume growth in

the North America region were factors driving this positive

trend. In addition, the development of other automotive

business, which comprises deliveries of parts sets for local

production in China and also the engine business, impacted

revenue positively. However, the current model cycle, the

challenging environment that we face in the Asia-Pacific region

and the devaluation of the pound sterling weighed on revenue

growth.

In the Motorcycles segment, revenue generated in connection

with the Ducati brand amounted to EUR 598 (612) million; this

was mainly due to model cycle factors.

Operating profit, Audi Group

EUR million 1– 9/2017 1– 9/2016

Operating profit before special items 3,941 3,918

Special items – –885

of which diesel issue – –752

of which Takata – –133

Operating profit 3,941 3,033

Key earnings figures, Audi Group

in % 1– 9/2017 1– 9/2016

Operating return on sales before special items 8.9 8.9

Operating return on sales 8.9 6.9

Automotive segment 9.0 6.9

Motorcycles segment 4.4 7.3

adjusted for effects of PPA1) 7.3 10.1

Return on sales before tax 9.2 6.5

1) Effects of purchase price allocation


Audi Q2


10

The Audi Group achieved an operating profit of EUR 3,941

(3,033) million in the first three quarters of 2017. This repre-

sents an operating return on sales of 8.9 (6.9) percent. The

figure for the prior-year period reflected the negative impact

of special items amounting to EUR −885 million, of which

EUR −752 million related to the diesel issue. In the prior-year

period, a further EUR −133 million resulted from recalls of

vehicles equipped with airbags made by the Japanese manu-

facturer Takata. Special items reflect certain matters in the

financial statements in cases where we believe their separate

disclosure permits a more accurate evaluation of the economic

performance of the Audi Group.

In the Automotive segment, we recorded an operating profit

of EUR 3,915 (2,989) million. The operating return on sales

was 9.0 (6.9) percent. The figure from the prior-year period

reflected the negative impact of special items. In addition to

currency management, lower distribution costs and our pro-

grams of measures had a positive impact on operating profit.

By contrast, the expansion of our model and technology port-

folio and of our international manufacturing structures were

also reflected here in the form of increased depreciation and

amortization.

Operating profit for the Motorcycles segment declined to

EUR 26 (44) million from January through September 2017,

mainly as a result of model cycle effects. This represents an

operating return on sales of 4.4 (7.3) percent. Adjusted for

the effects of purchase price allocation, operating profit came

to EUR 44 (62) million and the operating return on sales was

7.3 (10.1) percent.

In the first three quarters of 2017, the financial result stood

at EUR 113 (−194) million. The financial result of the Audi

Group includes the result from investments accounted for

using the equity method, the finance expenses and the other

financial result. The main driver of the improvement in the

financial result in the reporting period was the fall in finance

expenses to EUR −94 (−325) million from the interest-related

change in the measurement of long-term provisions. In addi-

tion, the result from investments accounted for using the

equity method improved to EUR 443 (240) million. Of this

figure, EUR 183 million was contributed by the investment

accounted for using the equity method in There Holding B.V.,

Rijswijk (Netherlands), as a result of the participation of a new

investor in the mapping service HERE. The measurement of the

shares in FAW-Volkswagen Automotive Company, Ltd., Chang-

chun (China), at EUR 228 (292) million is also included in the

result from investments accounted for using the equity

method. The measurement of the shares in Volkswagen

Automatic Transmission (Tianjin) Company Limited, Tianjin

(China), at EUR 67 (–38) million, had a positive effect. Follow-

ing the successfully completed ramp-up, the Chinese plant in

Tianjin manufactures vehicle transmissions for the local mar-

ket. The other financial result includes financial compensation

agreed between AUDI AG and Volkswagen AG, Wolfsburg, con-

cerning the economic performance of the respective brands

achieved by FAW-Volkswagen Automotive Company, Ltd.,

totaling EUR 142 (251) million.

In the first nine months of 2017, the Audi Group recorded

profit before tax of EUR 4,054 (2,839) million, which repre-

sents a return on sales before tax of 9.2 (6.5) percent. Profit

after tax was EUR 3,065 (2,158) million.

The Audi Group generated revenue of EUR 14,092 (13,883)

million in the third quarter of 2017, of which EUR 13,954

(13,756) million is attributable to the Automotive segment.

In the Motorcycles segment, revenue generated in connection

with the Ducati brand amounted to EUR 139 (127) million.

From July through September 2017, the Audi Group generated

an operating profit of EUR 1,261 (632) million, with the oper-

ating return on sales reaching 8.9 (4.6) percent. The prior-year

figures reflected the negative impact of special items of

EUR –620 million. The Automotive segment’s operating profit

was EUR 1,273 (646) million. Quarterly operating profit in the

Motorcycles segment was EUR –12 (–14) million due to

seasonal factors.

The Audi Group’s financial result in the third quarter of 2017

decreased to EUR –5 (17) million.

From July through September 2017, the Audi Group recorded

profit before tax of EUR 1,256 (649) million, with the return

on sales before tax amounting to 8.9 (4.7) percent. Profit after

tax came to EUR 969 (476) million.

The Audi Group’s total assets as of September 30, 2017, rose

to EUR 64,057 million, compared with EUR 61,090 million as

of December 31, 2016.

At EUR 28,400 (28,599) million, non-current assets were

almost on a level with December 31, 2016, whereas current

assets rose to EUR 35,568 (32,403) million.

The Audi Group’s equity as of September 30, 2017, increased

to EUR 28,239 million, compared with EUR 25,321 million as

of December 31, 2016. Compared with December 31, 2016,

the equity ratio for the Audi Group as of September 30, 2017,

was 44.1 (41.4) percent.

The Audi Group’s non-current liabilities as of the same date

amounted to EUR 13,833 (14,980) million. Current liabilities

as of September 30, 2017, rose to EUR 21,985 million, com-

pared with EUR 20,705 million as of December 31, 2016.


11

11

The Audi Group generated cash flow from operating activities

of EUR 5,461 (6,890) million in the first nine months of 2017.

The increased profit before tax had a positive impact. As ex-

pected, however, cash used in connection with the diesel issue

amounting to approximately one billion euros weighed on cash

flow from operating activities.

Net cash flow declined to EUR 2,489 (3,086) million as a

result of cash used in connection with the diesel issue. The

fundamental improvement in our disciplined investment

management as part of our programs of measures produced

encouraging results. In addition, cash outflows for equity

investments and for capital increases were lower than in the

prior-year period. The Audi Group’s net liquidity as of

September 30, 2017, was EUR 19,039 million, compared with

EUR 18,160 million as of September 30, 2016.

CONSOLIDATED COMPANIES AND STRATEGIC INVESTMENTS

In the period under review, there were no changes to the

group of consolidated companies with a material impact on

the presentation of net worth, financial position and financial

performance.

With effect from January 1, 2017, the fully consolidated AUDI

HUNGARIA MOTOR Kft., Győr (Hungary), was merged with the

fully consolidated AUDI HUNGARIA SERVICES Zrt., Győr, and

renamed Audi Hungaria Zrt., Győr. Furthermore, Volkswagen

Group Firenze S.p.A., Florence (Italy), was removed from the

consolidated companies of the Audi Group in the first quarter

of 2017. The purpose of the sale is to separate importer and

dealership operations.

There Holding B.V., Rijswijk (Netherlands), which is accounted

for within the Audi Group using the equity method, signed

contracts on the sale of shares in HERE International B.V.,

Eindhoven (Netherlands), in December 2016. A 15-percent

stake was sold to Intel Holdings B.V., Schiphol-Rijk (Nether-

lands). The transaction with Intel was completed on January

31, 2017. A 10-percent stake was scheduled to be transferred

to a consortium comprising NavInfo Co. Ltd., Beijing (China),

Tencent Holdings Ltd., Shenzhen (China), and GIC Private Ltd.,

Singapore (Singapore). To date, completion of the transaction

with the consortium had been subject to the receipt of official

approvals. A decision was taken in the third quarter not to con-

tinue with the transaction because the official review process

indicated that there was no practicable solution for obtaining

the necessary approvals. In the same period, negotiations

started concerning the partial sale of shares in There Holding

B.V., Rijswijk (Netherlands), in order to further expand the ba-

sis of cooperation. The corresponding investment is classified

as available-for-sale assets. This is not expected to have any

material impact on net worth, financial position and financial

performance. HERE wants to develop an open platform that

combines high-resolution maps with location-based real-time

information as a precondition of autonomous driving.

Meanwhile, Audi is stepping up the pace of its technological de-

velopment work on self-driving cars. For example, we estab-

lished Autonomous Intelligent Driving GmbH (AID), Munich, in

the first quarter of 2017. This company’s focus is on the devel-

opment of a software module that will enable autonomous

driving in the urban environment. We want the employees of

this start-up to be able to work outside the constraints of

Group structures and within flexible organizational boundaries.

Audi is assuming the lead role for the development of this tech-

nology of the future within the Volkswagen Group.

Additionally, plans announced in the first quarter of 2017 to

increase the investment in Silvercar Inc., Austin (USA), to 100

percent were realized in the third quarter of 2017. The U.S.

mobility provider has specialized in digital services for flexible

vehicle use in the high-end market segment.


12

WORKFORCE

With Audi actively shaping the transformation of the automo-

tive industry, the focus for recruitment and qualification is on

the important strategic future areas of electric mobility and

digitalization. For example, we are offering tailor-made quali-

fication measures for new technologies and tasks, and run

over 13,500 training courses each year. The vocational careers

are also being continually adjusted to reflect new develop-

ments. Over 800 young people embarked on dual vocational

training at Audi in 2017. The expertise of our workforce will

continue to serve as the basis of our entrepreneurial success.

PERSONNEL CHANGES

In the third quarter, the following changes in the Board of

Management of AUDI AG took effect as of September 1, 2017:

Alexander Seitz assumed responsibility as Board of Manage-

ment member for Finance, IT and Integrity, for which Axel

Strotbek had previously been responsible. Bram Schot suc-

ceeded Dr. Dietmar Voggenreiter as Board of Management

member responsible for Marketing and Sales. Wendelin Göbel

is also new to the Board of Management at AUDI AG, respon-

sible for Human Resources and Organization. He succeeded

Prof. h. c. Thomas Sigi. Peter Kössler assumed Board of

Management responsibility for Production and Logistics from

Prof. Dr.-Ing. Hubert Waltl.

Peter Kössler left the Supervisory Board of AUDI AG at the end

of August 31, 2017. He was succeeded by Stefanie Ulrich ef-

fective September 14, 2017.

REPORT ON EXPECTED DEVELOPMENTS, RISKS AND OPPORTUNITIES

Report on expected developments

The Audi Group continues to expect stronger global economic

growth for the full year 2017 than in the previous year. Within

this, we anticipate robust growth in economic output in the ad-

vanced economies and higher expansion rates in the emerging

economies with a major contribution from Asian countries.

Risks relate to protectionist tendencies, financial market

volatility and structural deficits in individual countries. Growth

prospects may also be negatively impacted by geopolitical

tensions and conflicts.

As before, we expect that the full year 2017 will show an in-

crease in global automotive demand. For Western Europe, Cen-

tral and Eastern Europe, South America and the Asia-Pacific re-

gion we anticipate an increase in new registrations, while we

expect unit sales in North America to be down.

The Audi Group currently expects full year 2017 unit sales for

the established motorcycle markets in the displacement seg-

ment above 500 cc to be slightly down on the previous year.



Lamborghini Aventador S Coupé


13

Overall, the Board of Management considers the Audi Group to

be still well equipped to handle both current and future chal-

lenges. The forecasts for the key performance indicators for

fiscal year 2017, which are explained in detail in the 2016

Annual Report on pages 137 ff., fundamentally remain valid.

However, we currently expect that the ratio of capex will be

moderately above the strategic target corridor of 5.0 to 5.5

percent. Against a backdrop of substantial model launches in

the upper segment, we thus anticipate an intensification of

capital expenditure in the fourth quarter of 2017. In the 2016

Annual Report, we forecast a ratio of capex within the target

corridor.

Report on risks and opportunities

The central task of risk management is to systematically render

risks transparent and improve their controllability, while also

providing the impetus to generate or exploit opportunities. The

priority is to increase the value of the Company.

The risks and opportunity management system as well as the

opportunities and risks to which the Audi Group is subject are pre-

sented in detail in the 2016 Annual Report on pages 140 to 151.

The comments made there also include statements that are still

valid in connection with the most significant risks from the diesel

issue and other possible proceedings as well as risks from the

statutory emission regulations and product development.

As presented in the 2016 Annual Report, against the backdrop

of the diesel issue there are risks that could in principle arise

from further governmental investigations and inquiries, in-

cluding in jurisdictions outside the United States. Agreements

reached on the diesel issue in the United States and Canada

were likewise described in detail in the 2016 Annual Report.

Official procedures and consultations in this connection are

still ongoing. Risks also continue to exist in light of customer

programs that have not yet been concluded, deadlines, and

legal fees that cannot yet be conclusively quantified.

In March 2017, Volkswagen AG and certain affiliates, including

AUDI AG, entered into a settlement agreement resolving the

environmental claims of ten U.S. states.

In April 2017, the U.S. federal court in California granted final

approval for the Third Partial Consent Decree settling civil

claims and injunctive relief under the U.S. Clean Air Act related

to vehicles with four-cylinder diesel engines and the V6 3.0 TDI

diesel engines. In May 2017, the same court granted final

approval for the Second Partial Consent Decree resolving

claims for injunctive relief under the U.S. Clean Air Act and

California environmental, consumer protection and false ad-

vertising laws related to V6 3.0 TDI diesel engine vehicles.

Also in May, the same court granted final approval for the

Second California Partial Consent Decree, the second 3.0 l

Partial Stipulated Order with the US Federal Trade Commission

(FTC) and the class action settlement reached with private

plaintiffs related to vehicles with V6 3.0 TDI diesel engines.

Various cases filed against Volkswagen AG and its affiliates, in-

cluding AUDI AG, remain pending before the federal court in

the multidistrict litigation in California. Moreover, certain members of the consumer and dealer classes have opted out

of the settlements in the California multidistrict litigation and

instead filed their own lawsuits, which are pending in the

California multidistrict litigation and various state courts in

the United States.

Also in April 2017, the U.S. federal court in Michigan accepted

a January 2017 agreement by Volkswagen AG to plead guilty

and to pay a criminal penalty, and imposed three years’ proba-

tion. In June 2017, Larry Thompson was named as Independ-

ent Compliance Monitor and Independent Compliance Auditor.

Together with his team, he will fulfill this role for a period of

three years pursuant to the criminal plea agreement and the

Third Partial Consent Decree, respectively.

Within the reporting period, the topics of risk management,

compliance and integrity were brought together in a new or-

ganizational unit at AUDI AG. It reports directly to the Board

Member for Finance, IT and Integrity. The new organizational

unit has the task of reinforcing integrity and compliance activi-

ties in the Company and of assuring Group-wide fulfillment of

the conditions attached to the agreements on the diesel issue.

This organizational unit’s tasks also include assuring coopera-

tion with the Independent Monitor appointed by the U.S.

agencies. Deadlines for the obligations set forth in Section V

of the Third Partial Consent Decree due during the reporting

period were met.



14

Moreover, in April 2017, a putative class action was filed

against AUDI AG and certain affiliates alleging that the de-

fendants concealed the existence of “defeat devices” in Audi

brand vehicles with automatic transmissions. There are now

14 such putative class actions pending in the California multi-

district litigation. On October 12, 2017, plaintiffs filed a con-

solidated class action complaint. The defendants’ motion to

dismiss is due on December 11, 2017.

Also in April 2017, the Canadian courts approved the settle-

ment agreement entered into between consumers and

Volkswagen AG, AUDI AG and other Canadian and U.S.

Volkswagen Group companies relating to four-cylinder

diesel vehicles.

And in May 2017, the U.S. federal court in the multidistrict liti-

gation in California remanded the consumer and environmental

claims brought by the attorney generals of 12 U.S. states to

their respective state courts, where future litigation of these

claims will proceed.

In July 2017, the same California court approved the Third

California Partial Consent Decree resolving claims for California

environmental penalties and refunds for both four-cylinder and

V6 3.0 TDI diesel engine vehicles. An agreement in principle had

been reached in January 2017.

Also on July 21, 2017, the California federal court granted the

motion of the Plaintiffs’ Steering Committee seeking attorneys’

fees and costs in connection with the 3.0 l TDI settlement.

In August 2017, the federal court in the multidistrict

litigation in California granted Volkswagen AG, Volkswagen

Group of America, Inc., AUDI AG and Audi of America, LLC’s

motion to dismiss the environmental suit filed by the State of

Wyoming on the grounds that the lawsuit was preempted by

the US Clean Air Act.

In September 2017, a Canadian court approved agreement

reached by Volkswagen AG and other Canadian and US

Volkswagen Group and Audi Group companies to resolve class

counsel’s legal fees in connection with the four-cylinder diesel

engines class action settlement with Canadian consumers out-

side of the province of Quebec.

In September 2017, a provincial regulator in Canada, the

Ontario Ministry of the Environment and Climate Change,

charged Volkswagen AG under the province’s environmental

statute with one count alleging that it caused or permitted the

operation of 2.0 l diesel vehicles including Audi vehicles that

did not comply with prescribed emission standards. A court

appearance is scheduled for November 15, 2017.

From July through September 2017, plaintiffs filed numerous

complaints in various jurisdictions on behalf of putative clas-

ses of purchasers of German luxury vehicles against several

automobile manufacturers including Volkswagen AG, AUDI AG

and its related entities. These complaints assert claims under

the US Sherman Antitrust Act, the Racketeer Influenced and

Corrupt Organizations Act, state unfair competition and

consumer protection statutes, and common law unjust enrich-

ment. The complaints allege that since the 1990s, defendants

engaged in a conspiracy to unlawfully increase the prices of

German luxury vehicles by agreeing to share commercially sen-

sitive information and to reach unlawful agreements regarding

technology, costs and suppliers. Moreover, the plaintiffs allege

that the defendants agreed to limit the size of Ad-Blue tanks

to ensure that US emissions regulators did not scrutinize the

emissions control systems in defendants’ vehicles, and that

such agreement for Volkswagen was the impetus for the crea-

tion of the defeat device. In September 2017 a hearing before

the Judicial Panel on Multidistrict Litigation (JPML) was held,

and in October the JPML issued its decision consolidating and

transferring these cases to Judge Breyer in the Northern

District of California.


Audi A4 Avant g-tron


15

In October 2017, regulatory approval for an emission compli-

ant repair of more than 38,000 generation 2.1 and 2.2 SUV

vehicles with V6 3.0 TDI diesel engines was granted. The emis-

sion complaint repair was agreed within the Second Partial

Consent Decree.

In connection with the diesel issue, the public prosecutor’s

office of Munich II initiated a criminal investigation at first

against persons unknown and by now against several suspects

on suspicion of fraud and false advertising in connection with

V6 3.0 TDI diesel engine vehicles. Regulatory offense proceed-

ings ("Ordnungswidrigkeitenverfahren") relating to the diesel

issue have also been initiated at Audi in July 2017. These cases

are at an early stage and it remains to be seen how they will

proceed.

On July 21, 2017, AUDI AG offered a software-based retrofit

program for up to 850,000 vehicles with V6 and V8 TDI

engines meeting the Euro 5 and Euro 6 emission standards in

Europe and other markets except the USA and Canada. The

measure will mainly serve to further improve the vehicles’

emissions in real driving conditions beyond the current legal

requirements. Customers will not be charged for the new soft-

ware. The full package is also offered for certain Porsche and

Volkswagen models and comprises voluntary and compulsory

measures that have already been reported to the authorities

and partially considered within their decisions.

For months, Audi has been systematically checking the emis-

sions of engine-transmission combinations, working closely

with the authorities, in particular the German Federal Minis-

try of Transport and the German Federal Motor Transport

Authority (KBA).

Audi currently assumes that the overall cost of the software-

based retrofit program including the part related to recalls will

be manageable and has recognized provisions in this respect.

If the investigations by Audi and the discussions with the KBA

should reveal that further measures are necessary, Audi will

swiftly implement the required solutions in the interest of its

customers as part of the retrofit program. The voluntary tests

have already reached an advanced stage, but have not yet been

completed. In addition, Audi is responding to requests from

the U.S. authorities for information regarding automatic trans-

missions in certain vehicles. Further field measures with finan-

cial consequences can therefore not be ruled out completely at

this time.

We continue to cooperate with all competent authorities to

clarify these matters completely and transparently. And as we

continue to move forward from the diesel issue, customer sat-

isfaction remains one of our highest priorities.

Official procedures and consultations continue. And despite

good progress, the customer programs stipulated in the set-

tlements reached with the US authorities regarding the V6 3.0

TDI vehicles have not yet been concluded. The risk provisioning

made so far in the form of provisions, notably in relation to the

diesel issue, is based on the current state of knowledge and is

therefore subject in principle to substantial estimation risk

due to the large number of parameters that are not yet cer-

tain. Until conclusion of the official procedures and consulta-

tions as well as of the customer programs, we will therefore

continue to monitor the parameters relating to the provisions

for the diesel issue together with the development of costs in

this connection and will make adjustments in line with current

findings as necessary.

Within the scope of the European Commission's ongoing

antitrust investigations regarding German automakers,

authorities examined documents in the offices of Volkswagen

AG in Wolfsburg and AUDI AG in Ingolstadt as part of an

announced review. The Volkswagen Group and the Group

brands concerned have been cooperating fully and for a long

time with the European Commission and have submitted a

corresponding application. It is currently unclear whether the

European Commission will instigate formal proceedings.

The systematic implementation of our corporate strategy

2025 requires a very high level of availability and consistency

of the critical IT systems for the digitalization process. Risks

exist here due to the higher demands placed on the IT system

landscape and infrastructure.

As described in the 2016 Annual Report, Audi – along with

numerous other automobile manufacturers – is unable to rule

out the risks in connection with potentially defective airbags

supplied by Takata. In the third quarter of 2017, by order of



16

the Chinese authority AQSIQ, a recall was announced for Audi

vehicles fitted with front airbags made by Takata that use

ammonium nitrate as a propellant. The related adjustments to

risk provisioning on the balance sheet were made at associate

FAW-Volkswagen Automotive Company, Ltd., Changchun

(China). However, further recalls in connection with Takata

front airbags cannot be ruled out. The technical investigations

as part of the analysis program within the VW Group and the

official consultations continue.

EVENTS OCCURRING SUBSEQUENT TO THE BALANCE SHEET DATE

There were no reportable events of material significance after

September 30, 2017.

FUEL CONSUMPTION AND EMISSION FIGURES, EFFICIENCY CLASSES

The fuel consumption and emission figures as well as the effi-

ciency classes for the passenger cars mentioned in the docu-

ment are given below.

Fuel consumption in l/100 km (combined): 16.9–1.6

Hybrid electric vehicles: power consumption in kWh/100 km

(combined): 19.0–11.4

Hybrid gas vehicles: fuel consumption (CNG) in kg/100 km

(combined): 4.3–3.3

CO2 emissions in g/km (combined): 394–36

Efficiency classes: G–A+

Fuel consumption, CO2 emission figures and efficiency classes

given in ranges depend on the tires/wheels used.

Further information on official fuel consumption figures and

the official specific CO2 emissions of new passenger cars can be

found in the “Guide on the fuel economy, CO2 emissions and

power consumption of all new passenger car models,” which is

available free of charge at all sales dealerships and from DAT

Deutsche Automobil Treuhand GmbH, Hellmuth-Hirth-Str. 1,

73760 Ostfildern-Scharnhausen, Germany (www.dat.de).

DISCLAIMER

This Third Quarter Report contains forward-looking state-

ments relating to anticipated developments. These state-

ments are based upon current assessments and are by their

very nature subject to risks and uncertainties. Actual outcomes

may differ from those predicted in these statements. The fig-

ures in brackets represent those for the corresponding prior-

year period.


Audi A7 Sportback

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